IAG share price crashed as we predicted: now what?

IAG share price crashed this week as concerns about its business escalated amid the ongoing war in the Middle East. This crash, which we predicted, saw it drop to a low of 360p, down by 23% from its highest level this year. So, will it bounce back or fall further?

IAG share price crashed amid geopolitical jitters 

In separate reports last week, which you can see here and here, we predicted that the IAG stock price was on the verge of a strong bearish breakdown. This prediction was based on its technicals, including the rising wedge pattern, which often leads to a strong bearish breakout.

The stock retreated sharply after the United States and Iran attacked Israel, leading to more volatility in the Middle East. Iran responded to those actions by attacking airports and energy infrastructure. 

There are signs of travel demand, especially in the Middle East, where IAG does a lot of business. At the same time, crude oil prices have continued soaring, with Brent hitting the key point at $85 for the first time this year. West Texas Intermediate (WTI) jumped to $77, a move that will lead to higher jet fuel prices, hitting its margins.

On the positive side, wars don't last forever, and there is a possibility that it will end - or pause - in the next few days or weeks. Such a move will lead to a sharp decline in oil prices and a new normal in the aviation industry.

IAG’s business is doing modestly well 

IAG, which owns popular brands like British Airways and Aer Lingus, is doing relatively well as evidenced by the recent financial results.

The results revealed that its total revenue rose by 3.5% to €33.22 billion last year. This revenue growth was boosted by its increased routes and emphasis on the premium packages, especially in the North Atlantic route, where it has a market share of 49%.

Most of the revenue growth happened in the first half of the year. Its revenue growth was flat in the third quarter and then dropped by 0.8% in the fourth quarter. 

IAG’s annual operating profit jumped by 17.3% to €5.024 billion, while its profit after tax rose by 22.3% to €3.34 billion. As a result, the company announced a new €1.5 billion of excess capital through dividends and share buybacks. 

IAG stock price technical analysis 

The daily timeframe chart shows that the IAG stock price peaked at 463p on February 27 and then plunged to the current 386p. This retreat happened as the stock formed a rising wedge pattern, which happens when there are two ascending and converging trendlines. 

The stock formed a down-gap on March 2 when the markets opened on Monday this week. It is now hovering at the 200-day Exponential Moving Average (EMA).

Therefore, the most likely IAG share price forecast is where it remains in this range for a while and then bounces back to fill the gap. The rebound will likely happen after the war in the Middle East ends.